Prince of Peace Lutheran Church Church Council Meeting ... · Letter – L. McGinley Intern/Leaders...

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Prince of Peace Lutheran Church

Church Council Meeting Agenda

September 13, 2016 7 p.m.

Agenda Item Presenter Discussion/Action Time

Call to Order T.Traaen Discussion/Action 10m

Introductions

Quorum

Opening Prayer R.Sherrill

Meeting Minutes T. Traaen Discussion/Action 2m

Approval

August 9, 2016

Pastor Rick’s R. Sherrill Discussion/Action 15m

Report

Mission/Vision

[Homework]

Letter – L. McGinley

Intern/Leaders

Treasurer’s Report G. Welch- Discussion/Action 10m

Rowland

Youth/Family

Ministry Report A. Cox Discussion/Action 10m

Old Business T. Traaen Discussion/Action 5m

Council

New Business T. Traaen Discussion/Action 10m

(a) Vendor Contracts

for consideration

2

EXECUTIVE SESSION Discussion/Action 35M

Budget/Staff Compensation

Audit

Call for Agenda Items T. Traaen

Closing Prayer R. Sherrill

Note: Times listed are estimates and may be adjusted. ‘Executive session’ allows

for the professional discussion of budget and staff compensation matters, as well

as matters related to fiscal and strategic planning for the church.

Prince of Peace Church Council Meeting (approved) June 14, 2016 7:00 p.m.

Present: Pastor Rick Sherrill, Teri Traaen, Gail Andrews, Greg WelchRowland, Audrey Cox, Les Holland, Brad Beebe, Anita Thorne, Carrie Goodman, Steve Edgar, Joy Johnson. Teri called the meeting to order at 7:03 p.m. Pastor Rick asked for prayer requests and said the opening prayer. Teri asked for a motion to approve the May 17, 2016 Meeting Minutes. Anita made a motion and Carrie seconded the motion. The Minutes were unanimously approved. Treasurer’s Report: please see attached: Greg said we are on track. Pastor Rick’s Report: The last 20 days have been very busy with Ministry. The trip to the Navajo Nation was great. It was very remote and quiet, 2 hours to Walmart and 90 minutes to a Hospital. The kids learned to exist without phones and other technology. They learned new games and really bonded. It was a wonderful learning experience for the entire group. Vacation Bible School went really well. It was a solid religious experience for the kids. Family/Youth Report: Audrey was very glad they went to the Navajo Nation. It was a completely different experience. A peaceful, Christ filled environment. The Youth group as a whole became a lot closer. Two youth will be coming to our Council Meeting in August to talk about their experience. The group lead worship, and Pastor Rick gave the sermon. It was a wonderful experience. Pastor Rick envisions a next step being an Adult/Family trip. There are lots of projects that need to be completed there. A P.O.P. and Navajo Nation partnership with 25 people. Personnel Report: Please see attached: Gail spoke about the Federal Department of Regulations for Wage and Overtime pay. We need to be in compliance and have full job descriptions drawn up. Discussion ensued. There was a positive reaction to having the Congregational Meeting during the Church Service on June 5, 2016. The only drawback this time, was a lot of things going on during that service, and it made the service a little longer than usual. It was nice to have all the Council Members at that service. In the future we may possibly do one Meeting during the service and another Traditional Meeting. Old Business: Teri distributed a book called Robert’s Rules of Order Simplified and Applied. She would like all the Members of Council to read it. Lou kindly purchased the books. Cell Tower: please see attached: Teri spoke about the process and told us about Don Stevens; Attorney. He is an expert on Cell Tower issues and has offered his professional services to help us navigate the legal process. Discussion ensued. New Business: Anita talked about her thoughts on our Mission Statement. Please see attached: Discussion ensued. Anita will chair a subcommittee. Executive Session: Called to order at 8:25 p.m. Please see attached: Teri discussed in detail the new Federal Regulation for wages and overtime. She has an employee working on a breakdown for the Church and Preschool. We are a fair employer. Pastor Rick said the closing prayer and the meeting was adjourned at 8:31 p.m. Respectfully Submitted, Joy Johnson, Secretary

Prince of Peace Church Council Meeting (unapproved) August 9, 2016, Choir room

Present: Teri Traaen, Pastor Rick Sherrill, Gail Andrews, Les Holland, Steve Edgar, Carrie Goodman, Joy Johnson, Audrey Cox, Youth: Blayke Hammer and Jacob Lara. On Phone: Greg WelchRowland. Absent: Anita Thorne, Brad Beebe. Teri opened the meeting at 7:03 p.m. She had Greg give the Treasure’s report on the phone. We are where we expected to be with regard to June. We are on track. Slightly down. Teri spoke about some topics:

1. There is an air conditioner unit that is out and needs to be replaced soon. 2. We should be looking at safety related project items in our budget. 3. We don’t budget for major repairs. We use Council Reserve. 4. We need to be proactive.

Audrey Introduced the Youth: Blayke Hammer and Jacob Lara. They came to the Council Meeting to tell us about their Youth trips this summer. Blake and Jacob told us about their trip to the Navajo Nation. *They went on a zipline course *Built a fence at the sweat lodge, and dug post holes by hand. *Stocked the food pantry. *The sweat Lodge is used for many different ceremonies. *The groups went to different houses and gave bags of food and ingredients. *It is 2 hours to the closest Walmart and Hospital. *The sweat lodge was built for the school in the community. *The biggest surprise ? How happy they are. They are very family oriented. They care a LOT about Family. Thank you to the youth for coming and telling us about their enlightening experiences this summer at the Navajo Rock Point Mission Trip. The Mission will be a hub to the Community. Audrey asked the Council to volunteer to be a Preschool Prayer Partner with Teachers at the P.O.P Preschool. This Sunday Aug. 14th will be a Celebration of Education Sunday. Audrey made a 20162017 Youth and Family Ministry flier. Please see attached: She went over the different activities planned. Teri asked for a motion to approve the June 14, 2016 minutes. The motion was seconded. The minutes were approved. Pastor Rick’s Report:

1. Planning a trip to Navajo Nation Friday September 30th to Sunday October 2nd. They will be doing the same activities as the July trip.

2. Planning a meeting on August 21st for people who may want to go to Tanzania in the Summer of 2017.

3. The Ugandan Kids Choir will be at our church on September 25th. The 20 kids in the Choir will sing at the morning service, then have a lunch after in Gangsei Hall donated by the Foundation.

Possibly someone could spearhead a media blitz possibly to do a show Sunday night? We are also looking for host families. 4. Pastor Rick is still thinking over Mission Statements. Please see attached: He would like to build a vision of “Who are we?” Pastor Rick would like feedback on this next meeting. Old Business: Teri spoke about the Internal Audit Scope and Findings Summary by Craig Myrmel, and Don Johnson. Dated August 15, 2014. Discussion ensued. Teri talked about the Church Vendor Contracts/Bid Solicitation Process. Please see attached: Add to the list: 8: Pay off Mortgage 9: Parking lot repairs. If we have a list of vetted vendors, the process will be easier and finished in a more timely manner. All three: Church, Foundation and Preschool will work on this together. Discussion ensued. Audrey, Jacob and Blayke were excused. Teri call to order the Executive Meeting at 8:30p.m. Teri discussed P.O.P. data on salaries. Discussion ensued about past cost of living raises and bonuses. Pastor Rick has had two reviews during his tenure here. The Employees are competitively compensated. Teri spoke about building budgets for the end of the year. New Business: We need to have an official vote on fixing the air conditioner, costing $5,000.00 for the Education Building. Joy made a motion to fix the air conditioner not to exceed $5,500.00 from MIC savings. (for campus projects.) Carrie seconded the motion, the motion was unanimously passed. Pastor Paul’s contract ends in December 2016. Discussion ensued. Pastor Rick said the closing prayer and the meeting was adjourned at 9:02 p.m. Respectfully Submitted, Joy Johnson, Secretary

Prince of Peace Council,

For the past several months I have been in discussion with Pastor Rick regarding the

status of the choir and my role at Prince of Peace. Along with piano accompanist, it is a

position I have held for about 8 years. But, throughout this tenure, I have been unable

to grow the choir as I had hoped. A number of factors have contributed to this . . . .

older members getting ill and passing away, members leaving the church for various

reasons, lack of time in schedules for rehearsals, etc. So, as of this summer, I have

decided to resign my position as Choir Director.

However, I feel that I have the talent and the commitment to serve Prince of Peace in

other capacities. Along with my music background, I have strong organizational skills

that I feel could benefit the worship/leadership team. Pastor Rick and I have discussed

ways that I could transition into other roles to help lead worship going forward.

There have been several changes for me personally this summer, and I feel that the

timing is right for some change and new opportunities at POP. I am unable to attend the

September council meeting due to a prior work commitment, but would be glad to

answer any questions prior to the meeting by phone or email.

Thank you for your prayerful consideration,

Lynne McGinley

Worship Leader - Logistics and Organization

Overview: This position blends leading position will not exceed 10 hours per week. TheSunday worship and serving as a logistical coordinator for the overall worship planning process. The position oversees worship scheduling, recruitment of congregational and outside musicians and the scheduling and promotion of special concerts and events. Additionally, this position will work with our other music leaders to lead congregational worship at defined intervals and will lead special choir opportunities as scheduled. Main Objectives: 1. in conjunction with the pastor, schedule all musicians for Sunday worship including main worship leader(s) and special music slots. 2. Recruit, schedule and manage congregation members to share their musical gifts in Sunday worship. 3. Recruit, schedule and manage external musicians to share their musical gifts in Sunday worship (average of 1 Sunday per month). 4. Select and schedule guest musicians when needed to ensure proper musical coverage. 5. In conjunction with the other worship leaders, lead Sunday worship 17 times per year using an eclectic mix of the best worship music available (an average of 1 out of 3 Sundays) 6. Organize and conduct special choir opportunities, including rehearsals and performances, 3 times per year in consultation with the pastor (Reformation/All Saints, Advent/Christmas, Lent/Easter). 7. Organize and lead 2 special concerts per year utilizing excellent congregational or local talent. 8. In conjunction with the pastor, organize and lead musical intern program through Grand Canyon University. Qualifications: 1. Demonstrated advanced musical skills that must include mastery of piano, guitar, organ or voice. 2. At least 5 years of experience working in a congregational setting. 3. At least 5 years of experience in choral conducting. 4. Demonstrated advanced organizational skills. 5. Demonstrated advanced skills in recruiting and managing people. Remuneration: $547.65 per month (year-round) (Revised: August 17, 2016)

3641 North 56

th Street, Phoenix, AZ 85018 + 480.945.9537 + www.popphoenix.org

Treasurers Report July 2016 September meeting 9/6/2016

Jul-15 July 16 Budget July 16-Actual 2015 YTD Actual 2016 YTD Budget 2016 Actual

ReceiptsEnvelope Pledged 20,104 27,534 22,907 171,103 194,883 180,803Envelope Unpledged 2,954 2,500 4,493 29,050 29,000 29,257Offerings - Loose 198 500 556 5,546 5,650 10,821Other Source of Income 0 693 693 0 4,850 4,850Special Offerings 214 100 178 5,952 5,300 4,045Preschool Facility Cont. 13,273 14,087 14,087 92,913 98,612 98,612Other Income 1,805 2,400 4,350 27,749 29,600 29,303Youth and Family Ministry 0 0 0 0 0 0Children's Ministry 0 0 0 7,165 6,500 5,270Dedictaed Benevolence 0 0 0 1,000 725 897Parish Education 0 0 0 265 0 0

Total Receipts 38,549 47,814 47,264 340,743 375,120 363,858 Expenses

C. Council 0 0 279 396 600 1,459Benevolence 2,050 2,050 2,050 14,662 15,550 15,550Dedicated Benevolence 0 0 0 1,000 725 897Outreach 0 264 264 1,036 1,848 1,769Parish Education 0 35 0 216 245 39Youth and Family Ministry 71 250 0 (130) 1,750 109Children's Ministry 3,661 3,525 1,448 9,228 8,175 7,616Worship 1,036 570 157 6,497 7,305 5,795Digital & Media Minstry 96 220 128 1,069 1,720 1,981Operations 11,098 12,215 11,301 69,687 75,795 71,750Admin. 2,985 3,302 2,754 23,659 24,939 23,941Long Term Debt 3,452 3,452 3,452 24,164 24,164 24,164Pastor 9,827 9,912 9,493 68,333 69,384 68,808Asst. Pastor 500 1,500 1,500 6,500 19,500 19,500Youth & Family Director 5,440 3,833 3,833 38,204 26,833 26,833Staff Education 0 400 0 469 1,180 150Other Pastoral 0 300 200 200 300 200Staff Compensation 10,884 11,679 10,717 84,284 88,473 84,665

Total Expenses 51,100 53,507 47,576 349,475 368,486 355,226

Net Receipts of Expenses (12,551) (5,693) (312) (8,731) 6,634 8,632

Preschool Jul-15 July 16 Budget July 16-Actual 2015 YTD Actual 2016 YTD Budget 2016 Actual

Tuitions and Fees 94,522 91,164 98,021 774,370 764,149 787,775

ExpensesSalaries 59,601 56,662 64,592 557,043 562,106 557,551Administrative 0 300 659 2,099 5,000 2,697Cost Share 7,109 7,923 7,923 49,881 55,461 55,461Discounts/Scholarship 2,058 2,918 2,630 18,092 21,168 17,772Oper, Main & Other 5,370 8,435 3,096 45,549 51,430 53,049Classroom Expense 2,541 1,500 1,324 7,327 10,350 6,074Facilities Contr. 6,164 6,164 6,164 43,151 43,151 43,151Total Expenses 82,843 83,903 86,388 723,142 748,667 735,755

Net Receipts of Expenses 11,679 7,261 11,633 51,228 15,482 52,020

Arcadia Music Academy Jul-15 July 16 Budget July 16-Actual 2015 YTD Actual 2016 YTD Budget 2016 Actual

Tuitions and Fees 763 1,000 2,209 30,526 32,900 35,834

ExpensesInstructors 706 754 1,404 23,654 23,791 28,402Director 592 592 592 4,118 4,144 4,145Operating Expenses 0 20 0 502 943 135Cost Share 550 550 550 3,850 3,850 3,850Total Expenses 1,848 1,916 2,546 32,124 32,728 36,532

Net Receipts of Expenses (1,085) (916) (337) (1,598) 172 (698)

Combined Receipts 133,834 139,978 147,494 1,145,639 1,172,169 1,187,467Combined Expenses 135,791 139,326 136,510 1,104,741 1,149,881 1,127,513Surplus / Deficit (1,957) 652 10,984 40,899 22,288 59,954

Monthly Year To Date

Treasurer's ReportPrince of Peace Lutheran Church

Period ending July 31, 2016

Financial Secretary Report July 2016 Septmeeting 9/6/2016

Date Service Attendance '16 Prior Year '15 Offering '16 Prior Year '15

7/3/2016 1st Service 91 110 4,550 3,541 2nd Service 0 0 - - Dedicated Fund OfferingsOther Service Organ Fund -$ Credit Card/Office 760 5,172 Arcaida Cares Packathon -$ Total 91 110 5,310 8,713 Arcaida Cares Brunch -$

Music Fund -$ 7/10/2016 1st Service 112 107 3,860 3,040 ELCA - Ellers -$

2nd Service 0 0 - Youth Ministries 25.00$ Other Service - Tanzania Mission Project 200.00$ Credit Card/Office 5,193 800 People Serving People -$ Total 112 107 9,053 3,840

Subtotal 225.00$ 7/17/2016 1st Service 111 98 4,055 2,067

2nd Service 0 - - Special/Other OfferingsOther Service HolidayCredit Card/Office 763 1,235 Flowers 40.00$ Total 111 98 4,818 3,302 Souper Bowl -$

Food Pantry 220.00$ 7/24/2016 1st Service 103 98 4,123 5,350 Other Designated Gifts 155.00$

2nd Service 0 - Other Service - - Subtotal 415.00$ Credit Card/Office 888 1,853 Total 103 98 5,011 7,203 Total Additional Offerings 640.00$

7/31/2016 1st Service 102 2,392 2nd ServiceOther ServiceCredit Card/Office 818

Total 102 0 3,210 -

Total for month 519 413 27,400 23,058

Year 2016 20155 wk month 4 wk month

Sunday Plate Offering 27,400 23,058Loose 556 198Other Source 693Subtotal Giving 28,648 23,256

Total Offering 28,648 23,256

Total Budget 31,227 24,648.

Differential (2,578) (1,392)

Monthly Attendance and Revenue ReportAs of July 31, 2016

Additional Offerings July 2016

Prince of Peace Bank Balances and Liabilities

Bank Balances

Church 1/31/2016 2/29/2016 3/31/2016 4/30/2016 5/31/2016 6/30/2016 7/31/2016

General Checking 39,576.88$ 41,299.88$ 46,602.14$ 43,077.27$ 62,639.83$ 42,201.09$ 41,601.63$ Dedicated Funds Savings * 114,965.16$ 117,270.33$ 116,089.35$ 112,327.09$ 111,843.38$ 102,306.04$ 101,915.01$ Columbarium Checking 5,881.69$ 7,604.33$ 7,604.33$ 7,604.33$ 7,604.33$ 7,604.33$ 7,604.33$ MIC Savings 12,746.32$ 12,746.62$ 12,746.95$ 12,747.26$ 12,747.59$ 12,747.90$ 12,748.23$

Total Church 173,170.05$ 178,921.16$ 183,042.77$ 175,755.95$ 194,835.13$ 164,859.36$ 163,869.20$

Preschool

General Checking 102,553.52$ 145,055.83$ 155,060.87$ 156,510.73$ 141,053.91$ 136,758.33$ 144,704.02$ Savings 100,958.68$ 100,961.09$ 100,963.66$ 100,966.15$ 100,968.72$ 100,971.21$ 100,973.79$

Total Preschool 203,512.20$ 246,016.92$ 256,024.53$ 257,476.88$ 242,022.63$ 237,729.54$ 245,677.81$

Total at Wells Fargo 376,682.25$ 424,938.08$ 439,067.30$ 433,232.83$ 436,857.76$ 402,588.90$ 409,547.01$

Liabilities

Original Amount Owed

Amount Due 7/31/2016

Thrivent for Lutherans Mortgage 600,000.00$ $343,641.01

* Note: See the Dedicated Tab for Dedicated Fund Savings Details.

Youth and Family Ministry Council Report – September Ministry Moments! August kicked off Youth and Family Ministry programs with our confirmation classes resuming, high school youth group, kickoff pool parties, youth worship leaders, mom and dads night outs, and family service feeding the homeless. The ministry moment in the midst of the busy-ness of the start of a school year is the excitement that is present. The number of youth and parents jumping in to see what God has in store for them this year at Prince of Peace and beyond. The community that continues to build is inspiring to me. At our mom’s night out, we had 8 ladies from all different parts of their mom journey. We had laughter and great conversation…God’s joy on the faces of everyone as we left. At serving the homeless, we had 25 people taking a pause on whatever else in life was pulling them and spend 2+ hours serving. And not just standing around! Everyone that came from PoP worked so hard…washing dishes, standing in line serving with smiles and hellos for a couple hours, helping clean-up, passing out PB&J, and more. At Ch.I.L.L., we shared highs and lows…some laughter and tears but ultimately a community of young people walking through life with one another with God’s love. Lots of hustle and bustle…but above all that, we see an incredible amount of Christ’s compassion and grace. Confirmation For the 500th Anniversary of the reformation (2017), the confirmation class will be learning about the history of Martin Luther and the catechism. The confirmation of our 9th graders will be on Sunday October 30th during worship. Milestone Ministry This year we are bringing back Milestone Ministry! The Prince of Peace Foundation has agreed to fully fund the kickoff to this project and I am so excited!! On October 30th, we will kick off this ministry with a gift of a blessing bowl to all of our children and youth. Throughout their faith journey, they will receive stones for various milestones in their faith. See attached flier for more information. Service I am working hard to have an extra emphasis on service this year. I really believe that by sharing God’s love we grow closer to Him and to one another. We will be feeding the homeless once a month with First Church UCC and Hope4Phoenix. We have a big service event planned for September 11 and April 9. We will be participating in the Packathon in March. Families will also have a chance to serve pancakes at Grace on Sunday February 12 and March 12. I am working closely with Kathy Flores and Pastor Rick to make sure we have a good game plan for passion projects so we can incorporate the youth and families and other ministries in each project. Peer Ministry Our peer ministers who attended the retreat this past May are meeting regularly to establish regular leadership roles, refresh on PM skills, learn new tools for peer ministry and share any concerns or questions that have come up. We also have an event planned with the two other churches who participated in the Peer Ministry retreat with us – All Saints and Peace. This will be on November 5th.

Milestone Ministry

Milestones Ministry provides a faith milestone as a marker along life’s Milestones Ministry provides a faith milestone as a marker along life’s Milestones Ministry provides a faith milestone as a marker along life’s Milestones Ministry provides a faith milestone as a marker along life’s

journey that says, “This is something important, and God is here, too.” journey that says, “This is something important, and God is here, too.” journey that says, “This is something important, and God is here, too.” journey that says, “This is something important, and God is here, too.”

It is a faith formation partnership between both home and congregation It is a faith formation partnership between both home and congregation It is a faith formation partnership between both home and congregation It is a faith formation partnership between both home and congregation

that helps all generations recognize God’s presence in everyday life. that helps all generations recognize God’s presence in everyday life. that helps all generations recognize God’s presence in everyday life. that helps all generations recognize God’s presence in everyday life.

How does it work?How does it work?How does it work?How does it work?

• Prince of Peace children and youth are given a special

handmade Prince of Peace Blessing Bowl.

• Milestones are celebrated in worship throughout the year with a

special blessing and the gift of a prayer stone.

• The prayer stones go into the blessing bowls at home.

• Families participate in a special at home prayer and activity.

A special thanks to the Prince of Peace Foundation for fully funding the

kickoff to this new ministry for our children, youth and families.

For more information, visit www.popphoenix.org/childrenyouth

Prince of Peace Lutheran Church * Phoenix, AZ

Prince of Peace Milestones: Prince of Peace Milestones: Prince of Peace Milestones: Prince of Peace Milestones: Baptism (throughout the year)

Baptismal Birthday (once a month)

Start of Kindergarten (August)

Communion (March)

5th Grade Bibles (September)

Confirmation (October)

Driver’s License (May)

Graduation (June)

Congregational Audit Guide

A resource provided by the Office of the Treasurer of the Evangelical Lutheran Church in America

This guide is prepared for

THE CONGREGATIONS OF THE

EVANGELICAL LUTHERAN CHURCH IN AMERICA

“So then, each of us will be accountable to God.” (Romans 14:12)

“We intend to do what is right, not only in the Lord’s sight, but also in the sight of others.” (2 Corinthians 8:21)

“Who then is the faithful and prudent manager?” (Luke 12:42)

“Give me an accounting of your management.” (Luke 16:2)

Preface 5

DISCLAIMER _________________________________________________________ 5

CONGREGATIONAL AUDIT GUIDE FORMAT _____________________________ 5

WHAT IS AN AUDIT? _______________________________________________________ 6

WHY WOULD A CONGREGATION WANT AN AUDIT? (OR “DON’T YOU TRUST

OUR MEMBERS AND STAFF?”) ______________________________________________ 7

DO I HAVE TO BE A CPA TO UNDERSTAND CONGREGATIONAL AUDITING?

WHO CAN PERFORM AN AUDIT? ____________________________________________ 7

WHEN SHOULD A CONGREGATION HAVE AN OUTSIDE AUDIT? ______________ 8

ARE THERE OTHER DEFINITIONS I SHOULD KNOW? WHAT ARE RESTRICTED

FUNDS? CAN YOU GIVE ME AN EXAMPLE? __________________________________ 8

HOW DO RESTRICTED FUNDS DIFFER FROM DESIGNATED FUNDS? __________ 9

WHAT DOES AN AUDIT DO? ________________________________________________ 9

WHAT ABOUT AUDITING MONEY HELD BY GROUPS WITHIN THE CHURCH? 10

WHAT ABOUT CONFIDENTIAL INFORMATION AND RETENTION? ___________ 10

WHEN IS A CONGREGATION AUDIT BEST CONDUCTED?____________________ 10

HOW DOES THE ACTUAL AUDIT PROCESS BEGIN? _________________________ 10

WHAT IS THE AUDITOR’S REPORT? _______________________________________ 11

HOW AND WHEN IS THE AUDIT REPORT PREPARED? ______________________ 11

EXHIBIT I: CONGREGATIONAL AUDIT PROGRAM _________________________ 12

EXHIBIT II: STANDARD FORM TO CONFIRM ACCOUNT _____________________ 21

EXHIBIT III: STANDARD FORM TO CONFIRM DONOR CONTRIBUTION

INFORMATION ____________________________________________________________ 22

EXHIBIT IV: ANNUAL AUDIT REPORT ______________________________________ 23

Congregational Audit Guide A resource provided by the Office of the Treasurer of the Evangelical Lutheran Church in America

Page 5 of 25 Last Updated: February 28, 2013

The latest version of this document can be found at: www.ELCA.org/treasurer/congregations

Preface

DISCLAIMER

The ELCA churchwide organization is pleased to provide this resource but is not responsible for

the conduct of congregational audits, nor does it provide legal or financial advice to

congregations through this resource. Congregations should seek assistance and advice from their

local advisors when specific issues arise. This resource is provided to you as a service; it should

be used to increase knowledge of auditing principles within your congregation, including the

understanding of why audits should be conducted and the uses to which they can be applied by

officials of the congregation. ELCA congregations and ELCA entities have permission to use

and reproduce this resource as long as attribution is given.

CONGREGATIONAL AUDIT GUIDE FORMAT

We will use a question and answer format in presenting the information provided in the

following pages. We have tried to present questions and issues we ourselves have asked or have

been asked by others.




What is an audit?

The ELCA Model Congregation Constitution does not define what a congregation audit is. The

Model Constitution provides for an Audit Committee:

C13.03. An Audit Committee of three voting members shall be elected by the

Congregation Council. Audit Committee members shall not be members of the

Congregation Council. Term of office shall be three years, with one member elected

each year. Members shall be eligible for reelection.

It does not, for example, say what kind of work an audit committee must do. Nor is there any

requirement that the audit be performed by a professional, that it conform to generally accepted

auditing standards, or that it be prefaced by the usual representations and caveats that auditing

firms incorporate into their audits.

Congregations vary greatly in size, ministries, resources and budgets. An audit committee is

meant to provide the oversight necessary to promote a strong control environment and to afford

reasonable assurance that good stewardship is being used in handling and accounting for the

funds and other assets of the congregation. To a professional auditor or accountant, how we

define an audit may be closer in professional jargon to a “review.”

This is a practical, working definition of an audit for the congregation:

A congregation audit is an independent evaluation of the financial records and the

internal controls of the congregation for the purpose of providing an opinion on the

reasonableness of the congregation’s financial statements and recommending

improvements to its internal controls.

An audit is a set of procedures that in the judgment of the auditor will provide the evidence or

information needed to provide an opinion on the financial statements of the congregation. These

procedures also provide insight as to whether a congregation’s internal controls are adequate.

Professional financial auditors (CPAs) follow professional standards in conducting their audits.

Exhibit I provides some suggested audit procedures that can be used by congregation members

or volunteers in performing an audit when a professional audit firm cannot be afforded. Audit

judgment involves determining which and to what extent these procedures should be applied in

reviewing each area. The materiality ($ size) of each area is a key consideration in making these

judgments.

For many congregations, it is highly advisable to have a professional audit conducted by a

qualified independent accounting firm; others, due to cost and budget considerations, may wish

to have an independent member(s) of the congregation with accounting or financial backgrounds

perform the audit. If the congregation determines that it is not economical to have an external

audit every year, then it may be performed on a two- or three-year cycle with an internal audit

performed in the interim years.




Why would a congregation want an audit? (Or “Don’t you trust our members and staff?”)

There are all kinds of related questions asked about why a congregation should have an audit,

including:

Why would a small church with a tiny budget need an audit?

Why would a big church with lots of controls in place and with a full staff of professional

administrators need an audit?

Why waste the time or the money, or both, on an audit when everybody knows the church

treasurer is as honest as the day is long?

Conducting an audit is not a symbol of distrust. It is a mark of responsibility. It is good

stewardship demonstrated for all to see. It is a message to congregation donors that you

care about their gifts.

There are many reasons for annual audits. For example, an annual audit:

Is the best way we know of protecting the individuals the congregation elects to offices of

financial responsibility from unwarranted charges of careless or improper handling of funds;

Protects the congregation’s reputation and builds the trust and confidence of the financial

supporters of the church in the way their money is being accounted for (trust and confidence

lead to improved patterns of financial support);

Sets habits of fiscal responsibility to assure that when there is turnover in personnel there will

be continuity in accountability and nothing will fall through the cracks;

Do I have to be a CPA to understand congregational auditing? Who can perform a

congregational audit?

No. A person with some familiarity with congregational financial records and some basic

accounting practices can perform many of the audit procedures. Congregations throughout the

ELCA do a great job of fulfilling their responsibilities to make provisions for an annual audit

without the benefit of formal training in accounting or fiscal management, whether it’s an audit

by outside professionals, or whether it’s by some person in the congregation or neighboring

church with financial knowledge or expertise. The audit program found in Exhibit I is provided

to help you.

Generally, a person who is “qualified” to perform a congregational audit will have some

experience with accounting principles and records, gained through bookkeeping, office

management or accounting courses. The person must have the time to devote to the audit and be

willing to follow through on different requests for information and to complete the procedures

and reporting in the audit program (Exhibit I) provided in this booklet. Sometimes a small

congregation will agree with another small congregation in the same area to have the treasurer of

each audit the other. Often congregations have accounting professionals among their members

who are not serving that congregation in any of its financial functions who may be willing to

perform the audit as a donation of services.




When should a congregation have an outside audit (CPA) firm perform its audit?

Congregations with annual receipts in excess of about $400,000 should seriously consider

engaging an outside auditing firm to perform the audit. This is a recommendation and is not

binding, but is prudent stewardship since more complexity is involved as receipts and

expenditures become larger. Even if a congregation feels the audit expense is too great to do

every year, they should set an “every other year” or “every third year” pattern, budget for it, and

stick to it.

Are there other definitions I should know?

Individuals auditing church financial records should know the definitions of “restricted funds”

and “designated funds,” and how and why each category is accounted for differently in the

church’s records.

What are restricted funds?

Restrictions come about when a donor imposes a stipulation on a gift that limits its use to a

specified purpose. If a congregation accepts a gift which can be used only for a specified

purpose, that gift must be accounted for separately from gifts given to the organization in general

support of the congregation. The reason why it is important to account separately for restricted

assets is that if they are used for purposes other than the one (or more) specified, the donor (or an

heir of a deceased donor) may be entitled by law to ask for specific enforcement of the terms of

the gift or possibly for return of the gift, even years later. It should be noted that a gift does not

need to be accepted if the congregation feels that the terms of the gift are too cumbersome.

Can you give me an example of a restricted gift?

Suppose member Jane Doe gives $10,000 and simultaneously delivers a letter that her gift is to

be used to help buy a new piano. If the gift is accepted, the $10,000 would be a restricted gift to

be accounted for in the congregation’s records as restricted funds. Jane’s letter should be kept in

the congregation’s financial records and the money spent only to buy a new piano.

Here’s a second example. Suppose member Sam Roe gives $100,000 and writes to say that his

gift is to be invested and the income from it used to buy music for the music program. The

$100,000 is also a restricted gift.

But aren’t those two gifts different? One can be spent, the other can’t.

While both are restricted assets, the money for the piano is called “temporarily restricted.” That

means that the donor-imposed stipulation can be fulfilled by the action of the congregation in

deciding to buy a new piano, then doing it. Assets that are “temporarily restricted” can ultimately

be spent, though they must be spent for the specified purpose. The money given by Sam to be

invested is “permanently restricted,” meaning that the full $100,000 was stipulated by the donor

to be held permanently. Note that the income from the gift is to be used only for a specific

purpose. The income is temporarily restricted in that it can be spent by action of the congregation

in deciding to buy music, but the gift itself is permanently restricted. These two types of assets

should be reported separately.




Sometimes congregations do not refine their accounting records to the point of separately

reporting temporarily and permanently restricted assets in financial statements because they

don’t have enough of either to warrant the time. That works if the records are clear enough to be

able to distinguish between what can ultimately be spent and what must be held permanently.

Remember that when a gift is accepted subject to a stipulation for use in a particular way, the

result is a contract to use it only in that way. Keep the donor stipulations permanently so you will

know what the congregation has contracted to do.

There’s another point to remember. The congregation cannot change any restriction without the

specific consent of the donor, which should be written.

How do restricted funds differ from designated funds?

Designated funds are those funds that have been voted by the congregation council to be used for

a particular purpose. For example, suppose the council decides this fall to set aside from money

on hand the amount of $5,000 to send five persons next year to an appropriate seminar on

making disciples. Following the vote, the $5,000 should be reported as a “designated” fund.

Because the stipulation for its particular use was made by the congregation itself, that stipulation

(or designation), can be changed by the action of the body that put it in place. There is no other

party involved as in the case of the receipt of restricted gifts. Next year, if the council decides the

$5,000 can be better used for some other purpose, such as to buy a new van, it can vote to apply

the money for that purpose. For accounting purposes, “designated” funds are unrestricted.

What does an audit do?

An audit should:

Verify the reliability of the financial statements including procedures to

o Independently verify the integrity of the reports of the treasurer(s);

o Provide assurance that receipts are properly safeguarded, deposited in a timely manner,

and properly classified in the financial statements;

o Independently verify the existence of cash and accounts receivable and that all bank

accounts are reconciled on a monthly basis by someone who is not allowed to write

checks;

o Independently verify the amount of indebtedness;

o Ensure that expenses are properly supported and approved;

o Verify that donated and earned funds of the congregation have been used and recorded as

stipulated by the donors.

Evaluate the effectiveness of key financial controls such as accounting controls (systems that

reduce the possibility of loss or errors);

Provide segregation of duties (assurances that more than one person is involved in critical

steps in handling money so that there can be checks and balances);

Evaluatereasonableness of systems and procedures in the light of all factors, including the

size of the congregation and its budget;

Assure adequacy of insurance coverage;

Establish systems for retaining and accessing meeting minutes that have financial

implications (e.g., Finance Committee, Trustees, Congregation Council); and

Records that show donors’ stipulations for the use of gifts made to the congregation.




A congregation’s unique circumstances may suggest that additional steps should be taken. It is

important to document the different financial processes of your particular congregation.

Additional steps will be discussed in the next few pages.

What about auditing money held by groups within the congregation?

It is important that all ministries of the congregation be accountable. This means that the

treasuries that are to be audited include:

Financial Secretary or Bookkeeper

Congregation Treasurer

Trustees Treasurer

Memorial Fund Treasurer (if any)

Congregation Foundation or Mission Endowment funds

All other separate treasuries or bank accounts maintained by a group using the same tax

identification number as the church, including youth group, pastor’s discretionary fund,

church school, and others.

What about confidential information and retention?

The person(s) conducting the audit may obtain access to confidential information and must treat

that information with care. The auditor’s work papers may contain confidential information.

These work papers as well as all financial records should be retained as per ELCA

recommendations in a secure, limited access storage area. Please see Records Management for

Congregations - Evangelical Lutheran Church in America.

When is a congregational audit best conducted?

An audit is usually best performed after the books are closed for the year and the treasurer and

financial staff are available to provide the needed information and answer any questions needed

to support the audit process. Waiting too long after the year-end close may make it more difficult

to retrieve needed information from the prior year. Before the audit begins, the auditor should

prepare confirmation forms for banks, the synod, insurance companies and donors. Those

confirmations are essential for providing the auditor with independent verification of bank

account balances and authorized signatures, monies sent to the synod for benevolence funds and

special gifts, the coverage level(s) and related premiums for all insurance policies and, on a test

basis, donor contributions.

How does the actual audit process begin?

An audit typically starts formally with an introductory meeting with the treasurer of the

congregation. Prior to this meeting the auditor would hopefully have had a chance to review the

congregation’s financial statements and audit program to identify the scope of the audit and key

information needed. The audit program (see Exhibit I) identifies the information typically used to

perform each section of the audit. At this meeting the scope would be reviewed and key

information (e.g., policies, procedures, information needed to create confirmations for bank and

other accounts, other information) obtained. It is important to get the confirmations mailed out

early since time must be allowed to obtain responses and any needed follow-up.

http://www.elca.org/Who-We-Are/Our-Three-Expressions/Churchwide-Organization/Office-of-the-Secretary/Congregation-Administration/Records-Management.aspx

http://www.elca.org/Who-We-Are/Our-Three-Expressions/Churchwide-Organization/Office-of-the-Secretary/Congregation-Administration/Records-Management.aspx




What is the auditor’s report?

When the audit is complete, the auditor should prepare a written report for presentation to the

finance committee and Congregation Council. Exhibit IV presents a possible report format and

outline.

The written report should include at a minimum:

1. A scope of the areas reviewed

2. An overview of the control environment – what was found to be operating as intended and

what was not

3. A listing of comments and recommendations

4. Statement of financial position (balance sheet)

5. Statement of changes in net assets (income statement)

6. Statement of cash flows

7. Comments, if any, on the reliability of the financial reporting, including any correcting

entries proposed

8. Comments, if any, on insurance policy coverage

9. Comments, if any, on compliance with donor restrictions on gifts

When all these steps have been completed, the auditor should review the work done with the

congregation treasurer and financial secretary, endeavor to answer any lingering questions, then

prepare the report.

How and when is the audit report prepared?

The audit report is prepared when the audit is complete, i.e., when the auditor is reasonably

assured that the financial records are in order, financial policies have been complied with, any

discrepancies have been investigated, and controls have been reviewed. After everyone agrees on

the findings, recommendations, and the tone of the report, the auditor is ready to present the

Report of the Annual Audit to the Committee on Finance and the Congregation Council. The

audit results should be treated confidentially to be shared with the Congregation Council and

others only as needed.




Exhibit I: Congregational Audit Program

This audit program provides a set of audit procedures concerning the information needed to

assure that the financial statements of the congregation are fairly stated and appropriate internal

controls are in place. Some judgment is required of the auditor to determine which steps are most

important to perform and the amount of testing that might be completed under each step. The

materiality of the area involved should be a key consideration in making these judgments.

AUDIT STEP

1. POLICIES AND PROCEDURES

Purpose: To understand current congregational accounting processes and internal controls that

are in place. If written procedures do not exist, a short discussion should be held pertaining to

each of the areas under review to outline current procedures in place. Procedures and/or

discussion should include relevant internal controls such as approvals, separation of key duties,

reconciliations, etc.

Review the congregation’s procedures relating to the accounting, finance and treasury

functions. Ensure these procedures are up-to-date, have been approved by the Congregation

Council and address the following areas:

Offerings (Sunday and special)

Cash Receipts/Donations

Restricted/Special Funds

Bank Accounts and Investments

Expenses/Disbursements

Receivables/Other Income

Asset Classification (Fund Balances)

Fixed Assets

Payroll

Insurance

Records Retention

Data Processing

2. BANK AND INVESTMENT

Purpose: To obtain evidence that cash and investment balances are fairly stated on financial

reports.

Obtain a listing of all bank and investment accounts in the name of the congregation and

execute the following:

Send a letter (see Exhibit II) to each financial institution, signed by an authorized signer

from the congregation requesting the balance in each account as of the congregation’s year

end. Also ask the institution for a listing of people who are authorized signers on each

account, including a listing of all authorized to make transfers by phone or online banking.

As with all confirmations, set a deadline for the return of this information and include a self-

addressed (to the auditor), stamped return envelope for the institution’s convenience. (Note:

depending on the time allowed for the audit, the congregation may use the year-end bank

statement as confirmation of the account balance.)

Continue to follow up until all information is received.

When the letters are received, check to make certain the balance reported by the institution

agrees with the reconciled general ledger balance.

Review the list of authorized signers received from the institution and ensure that these

people are authorized to sign per the congregation’s written procedures or by-laws.




3. BANK RECONCILIATIONS

Purpose: To obtain evidence that cash balances are properly stated and cash is adequately

controlled.

Obtain all the bank statements and related reconciliations for the year being audited and execute

the following:

Review all bank reconciliations to ensure that the beginning balance of each month is the

same as the ending balance of the previous month.

For each month, ensure that the book balance (from the trial balance) matches to the book

balance used in the reconciliations.

Agree the year-end confirmed balance from Step 2 to the bank balance reflected on the

reconciliation.

Pick one month and re-perform the bank reconciliation for each account using the trial

balance and the bank statement. Investigate all discrepancies.

Ensure the reconciling items are relatively current. All larger dollar items over six months

old should be questioned and resolved to the auditor’s satisfaction.

Ensure all reconciliations have been performed by a person with no access to the general

ledger and who is not an authorized check signer. Ensure the reconciliations have been

signed and dated by the person performing the reconciliation and a knowledgeable

employee independent of the process.

4. PETTY CASH

Purpose: To validate that Petty Cash is properly stated on the congregation’s financial

statements and is properly controlled.

Obtain the petty cash fund and execute the following:

Count the cash and receipts residing in the fund.

Reconcile the total amount to the petty cash fund listed on the congregation’s balance sheet.

Investigate any out-of-balance conditions.

Ensure that the fund is being reconciled on at least a quarterly basis.

Examine the receipts being put through the petty cash account to ensure their proper

classification and that petty cash is the correct method of payment for these expenses.

5. INCOME: BENEVOLENCE

Purpose: To verify that the income shared with the synods is accurately reflected in the

congregation’s financial statements.

Obtain the synod benevolences and special gift balances from the general ledger as of year-end

and execute the following:

Send a letter to the synod treasurer requesting the person to confirm the amounts received

from the congregation for Mission Support and other special appeals sent via the synod. Be

certain to set a deadline and enclose a self-addressed stamped envelope for the synod’s

convenience.

Follow up until the information is received.

Make certain the amounts reported by the synod treasurer agree with those obtained from

the congregation’s general ledger. Investigate any significant differences.

6. INCOME: OFFERINGS

Purpose: To validate individual donations through confirmation with the donor.

Randomly select 10 to 20 donors. Try to obtain an equal mix of restricted and unrestricted

donations. Be sure to include some of the larger donations as confirmation of these donations

provides additional assurance that the donations have been properly accounted for.

Execute the following:




Obtain the amount and type (restricted/unrestricted) of donations made by each donor

selected for the year under review from the general ledger.

Send a letter (see Exhibit III), with the amount and type of donation, to each person

selected, asking them to confirm the accuracy of the information. Be certain to set a

deadline and enclose a self-addressed (to the auditor) stamped return envelope for each

person’s convenience.

Continue to follow-up with the selected donors until all letters have been returned.

When the letters are returned, investigate any responses that do not agree with the

information obtained from the general ledger.

If there are discrepancies that cannot be explained, additional sampling may be necessary to

determine the root causes and materiality of the issue. If it is determined that a significant

accounting problem or fraud may exist, the appropriate governing committee should be

notified and an investigation launched.

7. INCOME: RECEIPTING AND RECONCILING

Purpose: To verify that donations are accurately reflected in the General Ledger and that an

important control over donations (donor statements) is working effectively.

Obtain copies of the tax letters sent to each donor for the year under review andexecute the

following:

Calculate the total of the tax letters sent to the donors and reconcile this total to the general

ledger. Investigate any unexplained differences.

Review tax letter to see whether it includes a statement requesting that the donor ensure the

donation amount listed agrees with their records, and if not, to contact the congregation.

Ensure that the tax letter includes a statement that no goods or services were received in

exchange for the donation.

8. INCOME: OFFERING COUNTING

Purpose: To verify offerings are properly accounted for and are properly controlled.

Observe (on a surprise basis if possible) the offering for two Sundays during the month in

which the audit is conducted and execute the following:

Ensure the offering is always handled in dual custody by non-related people, from the time

it is collected to the time it is put in the safe.

Observe the count of the offering, ensuring it is counted in a secured room, in dual custody

and a tally sheet is completed and signed by all the people performing the count.

Ensure a copy of the signed tally sheet for the offering is given to the church treasurer.

Ensure the offering is deposited in a timely manner (either in the overnight depository on

Sunday or kept in the safe until deposited on Monday morning).

Match the bank deposit receipt to the tally sheet sent to the treasurer for the offerings

observed, and verify that in each case, the documents agree and have been signed by the

treasurer.

Obtain the bank statement for the month in which the offerings were observed, and match

the deposit tickets to the corresponding deposits on the statement.

Randomly pick 10 offerings from the balance of the year and match the deposit tickets for

those offerings to the bank statements.

Obtain a report listing the amount of each collection for the year under review as well as for

the previous year. Perform an analytical review, investigating any unexplained fluctuations

in the level of collections (year over year and week to week).

9. INCOME: SPECIAL EVENTS/OTHER INCOME

Purpose: Verify income received from special events or usage of the church property is properly




accounted for.

Obtain a listing of events resulting in other income received by the congregation (e.g., special

offerings, men’s or women’s groups offerings, congregation picnic income, raffles, etc.) and


From the auditor’s personal knowledge of congregational activities, review the list of other

income-generating events to make sure it is complete.

Cross check this list against the other income accounts residing in the general ledger.

Check the amount of other income residing in the general ledger for reasonableness and

agree the aggregate amount of other income residing in the ledger to that residing on the

financial statements. Make certain the income is classified correctly (i.e., restricted or

unrestricted).

Select two major activities for further review, tracing the amount of income to any

documentation (e.g., a separate profit and loss) for the activity. Investigate any

discrepancies noted.

Select a sample of five events and trace the income generated from the sub-ledger to the

general ledger and ensure the amounts match.

Inquire as to the existence of any uses of the church facilities for non-church purposes that

the church is compensated for. Determine if an agreement is in place for these uses. Verify

that the amounts received are supported by these agreements.

10. INCOME: DESIGNATED

Purpose: Verify proper support exists for any designated funds.

Select a sample of two designated fund balances and:

Make certain the proper documentation (i.e., Congregation Council meeting minutes) exists

supporting the council’s designation of these funds for the specific project.

11. DISBURSEMENTS: SIGNATURE CONTROL

Purpose: Verify proper controls exist over check processing.

Obtain a sample of 25 checks written per quarter for the year under review and execute the

following:

Ensure each check is signed by an authorized person and that the signature looks

reasonable.

Ensure that the check stock is securely stored under lock and key and a limited number of

people have access.

Ensure blank checks are not signed in advance.

12. DISBURSEMENTS: DOCUMENTATION AND PROCESS CONTROLS

Purpose: Verify expenses are properly stated in accounting records.

Select a sample of 10 expenses per quarter for the year under review from the general ledger

and execute the following:

Trace each expense to its original invoice, and ensure it agrees to the amount recorded in the

general ledger and has been properly approved by an authorized person per existing

congregation policy.

Ensure all invoices selected were paid in a timely manner in compliance with the terms

stated on the invoice.

Ensure each invoice is coded with the account number to be charged and is properly

classified in the general ledger and the financial statements.

13. DISBURSEMENTS: DUPLICATE PAYMENT CONTROLS

Purpose: Test records for any potential duplicate payments.

Discuss with a knowledgeable employee the controls embedded in the accounts payable process




that would prevent a duplicate payment from being made and execute the following:

Obtain the listing of congregational disbursements for the year under audit from the

congregation’s check book or accounts payable system (if one is in place).

Review for any possible duplicate payments.

Discuss any duplicate payments noted with the appropriate individual, ensuring that all

exceptions are resolved.

14. DISBURSEMENTS: VENDOR PAYMENT CONTROLS

Purpose: Assess adequacy of controls over vendor payments.

Inquire as to what approvals are necessary to establish and pay vendors. Check to ensure the

following controls are in place:

All new vendors should be approved by an authorized employee independent of the vendor

establishment process.

All vendor payments should have a copy of the invoice attached and be reviewed and

approved by an authorized employee independent of the vendor payment process.

If an accounts payable system is in place, the system should be able to automatically

produce an exception report on a routine basis listing all vendors that have been added to the

system since the last exception report. This report should be reviewed and approved by an

authorized employee independent of the vendor establishment process each time a check run

is made.

If an accounts payable system is in place, the system should be capable of printing a report

listing all invoices scheduled for payment since the last pay period. All payments listed on

this report should be reconciled to the checks presented for signing before the checks are

issued by an authorized person independent of the vendor payment process.

15. DISBURSEMENTS: PURCHASE ORDERS

Purpose: Validate that payments are properly authorized and supported by a purchase order (if

applicable).

If the congregation utilizes a purchase order system, select a sample of 10 purchase orders and


Ensure each was properly approved by an authorized person.

Match the purchase order price and quantity with the corresponding invoice to ensure the

proper quantity was received at the agreed upon price per unit.

16. DISBURSEMENTS: VENDOR PAYMENTS

Purpose: Identify potential unauthorized payments.

Obtain the listing of all vendors paid during the year under review (using either the

congregation’s check registers or the accounts payable system if one is in place) and execute the

following:

Review the list for reasonableness and investigate any payments to unknown vendors.

Pay particular attention to any recurring payments to an unknown vendor.

17. GOVERNANCE AND ADMINISTRATION

Purpose: To validate that the financial records accurately reflect all Congregation Council

actions.

Obtain the minutes of the Congregation Council meetings for the year under review and execute

the following:

Review these minutes for any financial-related issues or actions and ensure they are

appropriately reflected in the financial records.

Review these minutes for any actions concerning capital expenditures (e.g., a new parking

lot, building addition).




Review the congregation’s balance sheet for all capital assets added during the year under

review.

Reconcile all capital assets added to the capital expenditures approved by the Congregation

Council.

Obtain a sample of five invoices for these capital expenditures and ensure each has been

charged to the appropriate capital project and has been properly approved in accordance

with existing congregation policy.

18. NOTES PAYABLE

Purpose: To verify the existence of any congregational loans and ensure they are properly

accounted for.

Inquire as to the existence of any congregational loans outstanding and execute the following:

Review the congregation’s checkbook (or accounts payable system if one is in place) for

evidence of any loans not listed.

Obtain the latest loan statement for each loan and match the amount outstanding to the loan

liability listed in the general ledger and balance sheet. Investigate any differences noted.

To guard against fictitious loans, obtain the latest loan statement for each loan and send a

letter in a self-addressed envelope to the lender asking them to confirm the loan balance

listed on the statement.

19. PAYROLL

(19-22) Purpose: To verify compensation expense is valid and properly accounted for.

Obtain the reconciliation of total salary expense, payroll tax and withholding from the trial

balance to the total W-2s issued for the year under review and execute the following:

Ensure that the book balances (from the trial balance) for each of these items match to the

book balances used in the reconciliation.

Recalculate the sum of the salary, payroll tax and withholding reported on the individual W-

2s and ensure that this total matches to the aggregate W-2 information for each of these

items used on the reconciliation.

Ensure all reconciling items appear reasonable.

Ensure the reconciliation has been performed by an authorized person, has been performed

in a timely manner (within 45 days of year-end), and has been signed by the person

performing the reconciliation as well as an authorized person independent of the payroll

process.

20. PAYROLL

Obtain all the federal form 941s (Employer’s Quarterly Federal Tax Return) and applicable

state 941 (or equivalent) forms completed for the year under review and execute the following:

Ensure the total of the taxes paid on form 941 agrees with the total of the payroll tax

expense listed on the congregation’s W-2s and reported on the congregation’s W-3.

Ensure the total of the taxes paid on form 941 agrees with the total payroll tax expense from

the trial balance.

Ensure each 941 and corresponding payment was transmitted to the proper governmental

entity in a timely manner.

21. PAYROLL

Select a sample of employees and execute the following:

Obtain a copy of the W-2 for each employee selected and ensure the amount of income,

withholding and payroll taxes (e.g., Social Security and Medicare) reported on each

employee’s W-2 matches the amount reported for that employee in the trial balance.

Verify that a completed and signed W-4 and I-9 are on file for each employee selected.




From the W-4, recalculate the amount of withholding requested by the employee and ensure

this matches the amount reported on the employee’s W-2.

22. PAYROLL

Obtain the employee’s payroll file and execute the following:

Verify that personnel files are safeguarded and confidential.

Ensure there is documentation in the file supporting the employee’s current rate of pay and

that this documentation has been approved by an authorized person or committee.

Review each employee’s salary for reasonableness.

Ensure that time sheets (if used) have been reviewed and approved by an authorized person.

Using the employee’s approved rate of pay, recalculate the salary for the year under review

and verify that this amount matches the income reported on the W-2.

If the employee has a tax-deferred annuity or 403(b) account, ensure it is supported by a

signed agreement. Based on this agreement, recalculate the deferred compensation and

ensure it matches the W-2.

For clergy, verify that any housing allowance resolution that is in place is properly

supported, approved and has been accurately applied to reduce the reportable 941 and W-2

income.

Ensure any other deduction to payroll (e.g., charitable contributions) are supported by

signed agreements and have been properly calculated.

23. BENEFITS

Review employee benefit plans and policies:

Ensure that employee pension and medical benefits are paid and current.

Verify that benefit expenses are properly calculated based on eligibility and employee

authorizations through review of applicable benefit plan descriptions and employee

authorization documentation.

Verify pension and benefit contributions with Portico Benefit Services. These confirmation

requests can be sent to: Portico Benefit Services – Compliance Manager, 800 Marquette

Ave., Suite 1050, Minneapolis, MN 55402-2892. Phone: 800-352-2876/612-333-7651. Fax:

612-334-5399. Email: [email protected].

24. INDEPENDENT CONTRACTORS

Purpose: Validate that 1099s were issued as appropriate.

Obtain the 1099s issued for the year under review and execute the following:

Select a sample of five 1099s issued and agree the information contained on the 1099 to the

accounts payable system and trial balance to ensure the information is accurate.

Review the 1099s selected to ensure the appropriate treatment of the person receiving the

1099 (e.g., that they would not be considered an employee-See IRS guidelines for

guidance).

Review the list of vendors that did not receive a 1099 and check for reasonableness.

Investigate any vendors that were paid over $600 that the auditor feels should have received

a 1099.

25. GOVERNMENT FILINGS

Purpose: Validate compliance with all other government filing requirements.

Inquire as to any governmental filing requirements and, if any exist, review the filings to make

certain they are accurate, current and complete.

If the state requires an annual or periodic filing to renew incorporation status, those reports

should be reviewed to ensure compliance.

If the state exempts real property of the congregation, and annual or periodic reports must




be filed, those reports should be reviewed.

26. DATA SYSTEMS

Purpose: To verify the existence of adequate controls over congregation information systems.

With respect to data processing controls, execute the following:

Ensure all software programs and data files are password protected and that each employee

has a unique password.

Ensure that access is restricted commensurate with job responsibilities.

Ensure all software and data files are backed up on a regular basis and backups are kept off

site.

Ensure all computers have current virus software installed and running.

Ensure there is a current computer/Internet use policy spelling out the congregation’s

position on the personal use of the computer and if allowed, what type of websites are

strictly forbidden.

Inquire as to who supports the congregation when hardware or software problems occur.

27. RECORDS MANAGMENT

Purpose: Verify records retention policy is in place and being adhered to.

Review the records retention policy:

Ensure all documentation is being properly stored and destroyed in compliance with this

procedure.

28 SAFEGUARDING OF ASSETS/DOCUMENTS

(28-29) Purpose: Verify adequacy of controls over safe deposit boxes.

Inquire if the congregation has any safe deposit boxes. If they do, execute the following:

Obtain a list of authorized key holders and verify that access has been approved by the

appropriate officer or the Congregation Council.

Ask to visit the bank(s) where the safety deposit box(es) reside and observe the content of

each box.

Ensure the contents of all safety deposit boxes are appropriate.

29. SAFEGUARDING OF ASSETS/DOCUMENTS

Ensure all critical congregational papers such as deeds, insurance policies and incorporation

papers are kept in a fireproof safe or in a safety deposit box.

File for Employer Identification Number & tax filings are safeguarded.

Incorporation papers are safeguarded.

Deed to church property and/or mortgage is safeguarded.

Insurance policies are safeguarded.

All prior year insurance policies are safeguarded and retained.

30. FIXED ASSETS

Purpose: Validate existence and accounting for Fixed Assets.

Obtain a listing of all fixed assets:

Verify their existence.

Review capitalization/depreciation policy.

31. INSURANCE

Purpose: To validate that appropriate insurance coverage exists for the congregation’s assets

and that the premiums are properly reflected in the General Ledger.

Obtain all the insurance policies in effect and execute the following:

Ensure the congregation has the proper level of personal property, fire, theft, casualty and

liability insurance in force.




Ensure the congregation has fidelity bond coverage for all people handling church funds.

Write a letter to the insurance agent(s) that services the policy(s) signed by an authorized

representative of the congregation requesting the confirmation of the policy number, level

of coverage, anniversary date and premium and if the policy is currently in force. As with

all confirmations, set a deadline for the return of the information and include a self-

addressed (to the auditor), stamped envelope with the request.

When the letters are returned, follow up on any discrepancies.

Reconcile the insurance premiums reflected in the confirmation letter above to the insurance

premiums expensed in the General Ledger.

32. FINANCIAL REPORTING

(32-33) Purpose: Review financial results for any unusual balances and/or variances.

Obtain samples of the financial reports generated on a weekly, monthly, quarterly and annual

basis. Ascertain that the reports:

Reflect an accurate and complete picture of the congregation’s finances.

Are helpful to management, the appropriate congregational committees and the

Congregation Council.

Include an approved budget and a budget variance analysis.

33. FINANCIAL REPORTING

Obtain the financial reports for the end of the year under review and the previous year. (i.e.,

income statement, balance sheet and statement of cash flows) and execute the following:

Compare the income statement for the year under review with that of the previous year.

Note any significant increases or decreases in revenue and expenses and inquire as to the

major factors causing the variance.

Compare the ending balance sheet for the year under review with that of the previous year.

Note any significant changes in assets, liabilities or equity and inquire as to the major

factors causing the change.

Ensure the items listed on the statement of cash flows tie back to the changes in assets and

liabilities listed on the balance sheet and the net income and expenses not using cash (i.e.,

depreciation) listed on the income statement.




Exhibit II: STANDARD FORM TO CONFIRM ACCOUNT

BALANCE INFORMATION WITH FINANCIAL INSTITUTIONS

(Congregation’s Letterhead)

Financial Institution:

We have provided to our auditors the following information as of the close of business on [MONTH

DAY, YEAR] regarding our deposit(s) and loan(s) balances. Please confirm the accuracy of the

information, noting any exceptions to the information provided in the space allotted below. If the

balances have been left blank, please complete this form by furnishing the balance in the appropriate

space below. If during the process of completing this confirmation, additional information about other

deposit and loan accounts we may have with you comes to your attention, please include such

information below. Please use the enclosed pre-addressed and stamped envelope to return the form

directly to our auditors.

Regards,

(Signature of Authorized Congregational Rep)

1. At the close of business on the date listed above, our records indicated the following deposit account

balance(s):

Account Name:

Account Number:

Interest Rate:

Balance:

Authorized Signer(s) on the Account:

2. Our records indicate that we are directly liable to your financial institution for the following loan(s)

at the close of business on the date listed above:

Loan Number:

Loan Balance:

Arrearage:

Maturity Date:

Description of Collateral:

Current Interest Rate:

Authorized Signer(s) on the Loan Account:

The information presented above is in agreement with our records, no other deposit or loan accounts

have come to our attention except as noted below:

Exceptions and/or Comments: _________________________________________________________

__________________________________________________________________________________

__________________________________________________________________________________

__________________________________________________________________________________

Financial Institution:_________________________________________________________________

Name (Print): ______________________________________________________________________

Authorized Signature: ______________________________________ Date:_____________________

Title: ______________________________________________




Exhibit III: STANDARD FORM TO CONFIRM DONOR CONTRIBUTION

INFORMATION

(Congregation’s Letterhead)

[Month, Day, Year]

William Johnson

123 Main Street

Any town, Any state 00000

Dear Mr. Johnson:

In connection with an examination of our accounts, our auditors, [either outside firm or auditor’s name]

desire confirmation of your donation to [insert congregation’s] as of [Month Day, Year]. Our records

indicate that we received a donation from you in the amount of [$$$], intended for use in [insert

appropriate fiscal year]. In addition, our records indicate that your donation was [not restricted or

restricted, as appropriate] as to its use.

If the above information is consistent with your records, please sign the confirmation below and return it

directly to [Audit firm’s address or auditor’s address, not to the church] in the pre-addressed, stamped

envelope provided with this letter. If your records do not confirm the above information, please note your

exceptions below.

Thank You,

Name [Title] (Congregational Stewardship Rep)

The information presented above is in agreement with my records except as noted below:

Signature_______________________________________ Date______________________

Exceptions/Comments__________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________




Exhibit IV: ANNUAL AUDIT REPORT

With this report, the Auditor(s) /Audit Committee present its audit of the financial books and records of

the congregation and all its related organizations to the Congregation Council.

Church: ____________________________________________________________________________

Synod: _____________________________________________________________________________

For the period beginning __________________ and ending ___________________

Audit Objectives

The audit objectives related to the internal audit of _________________financial books, records and

operations include determination that:

(Note: Include objectives that relate to audit work performed; i.e., if Petty Cash is not reviewed that

objective should be eliminated)

All assets and liabilities recorded in the congregation’s books and records are supported by

appropriate independent documentation (i.e., bank statements and vendor invoices);

All general ledger balances are appropriately reconciled to their underlying assets (i.e., bank

statements) and liabilities (i.e., accounts payable) in a timely and accurate manner;

All donations are properly classified on the financial statements in line with the donor’s intent;

Appropriate procedures are in place governing key financial operations and are being complied with;

Proper segregation of duties are in place for all key financial transactions and are not being

circumvented;

Controls governing the congregation’s investments and bank accounts are in place and operating as

intended;

All necessary insurance policies are in place and in force;

The Sunday (or special) offering is handled and counted in dual custody;

All monies generated and expenses incurred as a result of special events are properly accounted for

and can be traced back to the general ledger;

The petty cash fund is closely monitored and controlled;

That all major capital expenditures have been approved by the governing body (i.e., Congregational

Council) called for in the congregation’s by-laws;

Expenses are appropriately approved and supported by the appropriate documentation;

Fixed assets exist and are properly recorded in the general ledger;




Personal identity information is properly safeguarded both in system and paper form;

Controls over the payroll process are in place and operating as intended;

An appropriate records retention policy is in place and being complied with;

All vendors receiving a payment in excess of $600 annually receive a 1099; and

The appropriate data processing controls are in place and operating as intended.

Audit Conclusion

Note: The following is an example of the language that can be utilized to communicate the audit’s

result to the Audit Committee or the Congregational Council. This language can be modified to suit

the conclusion; ranging from “Based on audit work performed, significant control weaknesses were

noted to the extent that the council should not rely on the data contained in the church’s financial

statements” to “ Based on the audit work performed, the books and records were found to be

material accurate in all respects. Testing performed found no material control weaknesses.”

Based on audit work performed to achieve the objectives listed above, the books and records of

_______________ appear to be materially accurate in all respects. Testing performed also found, with

some exceptions as noted in this report, that the controls governing the financial operations process

appear to be in place and operating as intended. Although controls over financial operations appear to be

adequate, additional work is needed in the following areas:

Summation of key control issues noted.

Implementation of the recommendations outlined in this report would help strengthen existing controls

and provide additional efficiencies.




Comments and Recommendations

Any exception(s) noted during the audit along with applicable recommendations to address the issue(s)

identified should be entered in the explanation section of the report. Use additional forms if necessary.

When complete, the auditor(s) needs to sign and date the report.

Copies of this Report should be filed with the Audit Committee Recording Secretary, Pastor, the

chairperson of the Finance Committee and the Congregational Council.

Finding

Management’s Response

Finding


Finding


The auditor(s) has performed the procedures and testing called for in the audit program adopted by the

congregation. In doing so, the auditor(s) has reviewed the procedures governing the financial reporting and

operations process and has found the balances presented to be correct, procedures proper, and records

properly kept, except as noted above.

Signed: ______________________________ Date: ___________________

Auditor or Audit Committee Chair

The Congregational Council has reviewed this report and has discussed the recommendation(s) presented

by the auditor(s) and the accompanying responses with the pastor and congregational management. The

council will review progress being made to address any weaknesses identified in this report at subsequent

council meetings.

Signed: __________________________________ Date: ___________________

Presiding Congregation Council Member

Prince of Peace Lutheran Church Church Council Meeting ... · Letter – L. McGinley Intern/Leaders...

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Transcript of Prince of Peace Lutheran Church Church Council Meeting ... · Letter – L. McGinley Intern/Leaders...